If the speed of a nation’s trains was an indication of the pace of an economy, it would be full steam ahead for Turkey.

This week, the first of the new ultra high-speed trains came into service on the Ankara-Konya line, one of many that will connect conservative heartlands in central Turkey with the Western hubs of Istanbul and Izmir.

From the launch of a new airport on an artificial island, to a third airport in Istanbul that promises to be one of the world’s biggest, Turkey has visibly changed since a financial crisis forced it into an International Monetary Fund (IMF) bail-out programme in 2001.

This Western focus for a nation geographically in Asia and predominantly Muslim made it unique. Western powers believed closer ties with Turkey and encouraging its democracy would set an example to Arab nations in the Middle East.

With its strong economy and influence in the Middle East, Turkey was seen by the West as a valuable ally in times of need when wars or problems arose in the region.

Emerging markets generally are slowing down

But behind the skyscrapers, super-fast trains and planned building projects, Turkey’s once flying economy has slowed down and many fear the growth and optimism of the noughties have come to an abrupt end.

Emerging markets are experiencing a slowdown and Turkey, like Brazil, India and Russia among others, is struggling to maintain its rapid expansion.

City highways pass two towers under construction in the Zincirlikuyu district of Istanbul (Kerem Uzel/Bloomberg)

“What Turkey has in common with a lot of the major emerging markets is that growth weakened in recent years and this is reflective of structural problems in the economy,” says William Jackson, senior emerging markets economist at Capital Economics.

“Too low investment means the economy can’t grow as fast as we’re accustomed to. We’ve seen the same thing happen in Russia prior to the Ukraine crisis, even before that GDP slowed. I think a similar thing happened in Brazil – but that’s not to say every emerging market economy is suffering from this.”

Turkey’s economic slowdown

As Turkey heads to the polls again in a week’s time, the difference between the economic growth it posted during the 2011 general election and this year is stark.

Four years ago, Turkey grew at a rate of 8.8pc but in 2012 this dropped to 2.1pc and 4.1pc in 2013. The forecast for 2015 and 2016 is GDP growth of 3.5pc and 3.7pc.

This is a marked difference from earlier years when growth was consistently above 5pc and close to 10pc. Experts say the slowdown should not be surprising because of the lack of government reform.

“The Turkish economy ran out of steam,” Mr Jackson said. “There was a remarkably stable period of growth where the economy grew by around 5pc a year but since 2008 things seem to have taken a turn for the worse. The government has stalled on pushing through any reforms, the economy still has many weaknesses, social welfare is very generous and the labour market is very inflexible.”

Daron Acemoglu, professor of economics at Massachusetts Institute of Technology, said wrong decisions had been made on the economy by those in charge.

“Following the 2001 financial crisis, spending by ministries and procurements were put under a tight structure, increasing transparency and accountability. A lot of this has been eroded. The Turkish central bank, after years of terrible management and lack of credibility, started building credibility as it fought inflation (quite successfully!), and this has been all but lost.”

Among the bad news for the economy this year, the Turkish lira fell to a record low against the US dollar last month. On Thursday, the lira was at 2.66 against the dollar, a drop of 11pc this year.

It comes 10 years after the country dropped six zeros off the currency and introduced Yeni Turk Lirasi meaning new Turkish lira (1,000,000TL = 1 YTL).

The decision suggested the economy was strengthening and brought optimism to the people: Turkey, it seemed, was on its way up.

Turkey has a large current account deficit and the CBRT recorded year-on-year increase of $1.58 bn to $4.96 bn in March. The news disappointed many economists in Turkey as a decline in February by 4.2pc year-on-year suggested greater control of its deficit.

That drop was mainly attributable to falling oil prices since the country relies heavily on oil imports for its energy needs.

There was also an 8.1pc drop in foreign visitors to Turkey last month compared to April 2014, according to the tourism ministry, worrying for a country heavily reliant on the services sector.

Political intervention in the economy

But what most economists agree on is that the government has intervened too much. “[The Turkish government needs to] get out of the way. The main problem in Turkey is that the government already does too much,” said Prof Acemoglu.

Prof Acemoglu said government involvement in Turkish businesses created a “lack of innovation, initiative and the right type of risk-taking”.

“Which businessman can survive without government contacts and even worse, protection by powerful politicians? How many businesses can continue profitably without government contracts?

“This means the government has excessive power, corruption is fuelled and especially given the weakness of judicial institutions, there is a huge amount of uncertainty given the vagaries of Turkish politics,” he added.

"Which businessman can survive without government contacts and even worse, protection by powerful politicians?"

Although this dominance is unlikely to fade on June 7, there are questions about whether Mr Erdogan and the party will get the super-majority of 367 seats to change the constitution.

Turkey election polls open in

Mr Erdogan is seeking to change the republic’s parliamentary system into a presidential system like in the US. Some polls suggest the party will have a majority of 330 seats.

This would mean the change of constitution would go to a referendum but it is far from guaranteed that the Turkish people would vote for a presidential system.

Mr Erdogan’s comments on the economy and central bank are claimed to be scaring off investment. “Turkish policy makers need to tone down some of the more authoritarian tendencies that we’ve seen over the past five years. This has really deterred some of the more stable and long-term investment into the country,” said Mr Jackson.

Recep Tayyip Erdogan (Daniel Roland/AFP/Getty Images)

“The [presidency system] is a major concern [because] it would remove the checks and balances within parliament allowing him more rein in policy-making [and] remove some of the more moderate voices,” he added.

The other looming threat to the economy

Another event on the horizon is the expected US Federal Reserve interest rate rise. Turkey, along with India, Brazil, Indonesia and South Africa, is part of the “fragile five”, so called because of their weak growth, high inflation, and current account deficits. The countries were singled out by James Lord at Morgan Stanley for their particular weaknesses.

According to the economists including Murat Uçer, Turkey is one of the markets most vulnerable to a rate hike but if reforms were implemented now, it could stave off the worst of its impact.

“If Turkey still tries to muddle through [its economic problems] without a direction, there is no doubt Turkey will be hurting the most,” the adviser to Global Source Partners said.

“But at the same time, given that global rates will stay low for a very long time, liquidity is not disappearing tomorrow, and given that we still have some hope of putting together a convincing investment story, then I don’t see any reason why Turkey shouldn’t be able to weather the storm well,” Mr Uçer added.